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Tue, 14 Apr 2026

Tue, 14 Apr 2026 UK faces biggest hit to growth from Iran war of major economies, IMF says

The financial body cuts its growth forecast for the UK and warns the war threatens to throw the global economy "off course".
The International Monetary Fund (IMF) has predicted that the UK will be the hardest hit by the energy shock caused by the Iran war among the world's advanced economies, with its growth forecast reduced to 0.8% this year from 1.3%. This is a significant downgrade of half a percentage point and the largest among the G20 major economies, according to the IMF. The UK remains sensitive to rapid rises in energy prices due to being a net importer of energy, but the Fund expects it to recover quickly next year, becoming the fastest-growing European economy again with a growth rate of 1.3%. However, the UK is also forecast to have the highest inflation among the G7 economies this year at 3.2%, which is expected to peak temporarily at 4% before returning to the Bank of England's target rate of 2% by the end of 2027. The IMF has warned that a prolonged conflict could lead to a global recession, and central banks should be cautious in raising interest rates to counter higher inflation. Chancellor Rachel Reeves acknowledged that the war will have a cost for the UK but said the government is better equipped to handle it due to previous economic stability measures. The US Treasury Secretary, Scott Bessent, defended the decision to enter the conflict, saying the removal of the risk of Iran deploying nuclear weapons was worth the short-term economic pain. Shadow Chancellor Sir Mel Stride criticized Reeves for her handling of the economy and urged the government to step in with support measures such as cutting fuel duty to help keep pump prices down. The IMF chief economist Pierre-Olivier Gourinchas advised countries, including the UK, to be cautious about introducing assistance programmes due to limited room for maneuver.